As EU Sow Herds Shrink, Pork Export Doors Could Open

Great Britain’s National Pig Association (NPA) recently issued a dire warning to consumers about the possibility that Europe will see a major shortage of pork products in 2013.

US Meat Export Federation

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Great Britain’s National Pig Association (NPA) recently issued a dire warning to consumers about the possibility that Europe will see a major shortage of pork products in 2013. NPA noted that all of Europe’s major pork-producing countries have reported declines in their sow herds over the past year including: Denmark (-2.3%), Germany (-1.3%), Ireland (-6.6%), Spain (-2.8%), France (-3.2%), Italy (-13%), Hungary (-5%), the Netherlands (-3.6%), Poland (-9.6%), Austria (-2.8%) and Sweden (-7.2%).

U.S. Meat Export Federation (USMEF) Economist Erin Borror says the downward trend in production is already having an impact on Europe’s pork prices. NPA says this trend could become even more severe next year due to higher feed costs, new animal welfare regulations and other factors.

“European pork production is contracting already,” Borror explains. “This is evident through the spike in prices for European pork, which are at or near record levels. Right now pork prices are averaging around $1.13/lb. In terms of U.S. dollars, that would be a 19% increase over last year. If we look at it on a euro (currency) basis, prices are actually up 24% from last year.”

Borror says the weak euro has helped keep European pork competitive in the global market. That’s good news for distressed producers, but it adds to Europe’s domestic supply crunch. It also means that as supplies tighten further, global pork trade will be impacted.

“The European Union’s (EU) pork exports have remained strong, up about 4% in volume and up nearly 10% in value over last year,” she explains. “The weak euro had really been a significant factor in that performance by helping offset higher prices. The EU is the second-largest pork producer in the world (following China) and collectively it ranks just ahead of the United States as the world’s largest pork exporter. So when we start hearing talk in the press about a pork shortage in Europe, there are certainly ramifications for the global market.”

Borror says only a small volume of U.S. pork is exported to Europe due to restrictive production requirements, import quotas and significant duties imposed by the EU, which are not expected to change in the near future. The U.S. pork industry competes with Europe in some very important, high-value export markets. Therefore, any decline in the European pork industry’s ability to serve customers in these markets could further expand export opportunities for U.S. pork in the Eastern Hemisphere.

As a point for discussion, Borror says if the EU produces 3% less pork in 2013, it will remain a very strong exporter. “But in order to have adequate supplies and maintain relatively steady per capita pork consumption within Europe, this would mean about 600,000 metric tons of European pork would not be exported,” she adds. “This is important, because Europe is our main competitor in major pork export markets such as Russia, China, Japan and South Korea. These are all markets that we have in common with Europe.”

A reduction in Europe’s capacity to export pork could also impact the U.S. pork industry’s opportunities in the Western Hemisphere. If pork-producing countries such as Canada, Mexico and Chile ship more product to distant markets such as Asia and Russia, it will open up more opportunities in the Americas.